Dow Below 10,000 To Trigger Sell-Off, Or Buying?
Although the Dow’s move on Thursday was modest - lower by less than 1% - Wall Street watchers worry that it may have a major impact going forward.
For the first time since July 6th the Dow closed below 10,000 – a level that is widely considered psychologically important.
Bulls are quick to point out when the Dow reached this low point earlier in the summer, the market rallied and went on to log 7 straight days of gains.
However, the mood on the Street seems much more cautious now after a spate of data out this week suggested the economy was mired in a soft patch.
Technicals, however, paint a somewhat more optimistic picture. 1,040 has been – and could well remain – a level of support on the S&P.
How should you position now?
Instant Insights with the Fast Money traders
All the recent M&A activity in the market makes me bullish that when the first team gets back from summer vacation, the market could well go higher, says Steve Cortes.
(On the Halftime Report, Cortes reveals a market ‘tell’ that could suggest the S&P is about to zoom. Click here for all the details!)
The Dell /HP bidding war for 3 Par may be a sign that things are turning in the tech sector, adds Jon Najarian. And tech tends to lead. That seems bullish. And as we get closer to the election I think we start to see more bullish jobs data, Najarian adds. That too could provide a positive catalyst.
I think we’re seeing a continuation of the bearish trend that we’ve had for quite some time, counters strategic investor Dennis Gartman. We've continuously seen markets open on the highs and finish on the lows -- in ‘the dinger’; that’s bearish. Not the kind of activity I'd hang a bullish hat upon.
3-PAR PING PONG
Hope you like ping-pong because that seems to be the sport of choice in technology.
On Thursday Hewlett-Packard again raised its bid for 3Par above an offer from rival Dell .
It's unclear if the little-known data-storage maker could be worth more with one of the PC companies' marketing muscle behind it or if this is Corporate America's version of a shoving match between two very muscular technology titans.
Earlier on Thursday, Dell said 3Par had accepted its second offer of $24.30 per share in cash, or $1.52 billion. Dell made its first offer, $18 per share, for 3Par on Aug. 16, and HP responded Monday with a bid of $24 per share.
HP and Dell, two of the world's largest personal computer makers, are looking at 3Par as a way to build up their "cloud computing" businesses, which involve delivering software, data storage and other services to customers over the Internet. Either company would buy 3Par in part to cut data-storage costs.
Before the bidding began, 3Par had been trading at about $10 per share.
What’s the trade?
This is clearly a very aggressive bid, says Karen Finerman. I think valuations have been thrown out the window; it’s hard to see how it makes sense.
In every bet there’s a fool and a thief, says Jon Najarian. The question becomes who is who.
It reflects badly on HP as well as Dell, adds Zach Karabell. It says to me they’re really struggling for growth.
As we told you on Wednesday, A Reuters survey found most analysts expect another bid or two, and a final price of around $29 per share -- nearly three times Dell's first offer of $18 a share.
It may be worth watching 3Par rivals Isilon as well as CommVault , adds Jon Najarian. They’ve seen impressive bids on the heels of the 3Par bid and if they have solid businesses, someone could go after them, too.
It may be a sign that things are turning in the tech sector and we could see a lot more M&A activity, muses Jon Najarian.
AFTER HOURS ACTION: JCREW
Shares of J Crew traded sharply lower in extended trade after the retailer’s earnings' outlooks for the third quarter and full year fell below expectations.
However all was not doom and gloom.
The retailer, which sells upscale women's and men's apparel, accessories and shoes, said net profit in its second quarter was $34.9 million, or 53 cents per share, from $18.6 million, or 29 cents per share, a year earlier.
Revenue rose 14 percent to $407.5 million, helped by an 11 percent same-store sales rise. J Crew's catalog and Web business rose 16 percent.
However, the all important outlook was weak. J Crew said it expects third-quarter earnings to range between 55 cents to 60 cents, with 2010 earnings between $2.25 to $2.35 – below estimates.
What’s the trade?
The consumer has gone cold, says Patty Edwards, that’s what the JCrew CEO said on the call. But I like this company and at 12 times next year’s earnings I’m interested in picking up shares.
At $31 I like this stock too, says Jon Najarian.
> For more coverage of JCrew earnings click here
U.S. gold futures ended slightly lower on Thursday, retreating from an eight-week high earlier in the session, as better than expected jobless claims decreased the metal's safe-haven appeal
What’s the gold trade?
Gold tends to strengthen in the autumn which is when the stock market tends to weaken, explains Dennis Gartman. There’s a seasonal trend here.
AG PLAY IS GREAT WAY TO CREATE ALPHA
The traders are keeping a close eye on ag stocks which seem to be catching a bid.
How should you game it?
I’m very bullish on the grain market, says Dennis Gartman. Demand for grains is growing all around the world and supply is inhibited, especially because of the drought in Russia. I’d expect banks, especially those in the mid-West to benefit.
MARKET BUZKILL: APPLE, CISCO
The action in technology left bulls scratching their heads on Thursday. Apple rolled over ahead of their mystery event on September 1st and typically the stock climbs ahead of events. Also Cisco touched a 52-week low.
What's the trade?
I'm a buyer of Cisco, says Zach Karabell.
Me too, adds Jon Najarian. I'm a buyer of Cisco into Labor Day.
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Trader disclosure: On Aug 26, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes is long (FCX), (SFD), (BHP), (BMO), (TD); Cortes is long Crude Oil; Cortes is long Australian Dollars; Karabell owns (AAPL), (BHP), (BP), (C), (CSCO), (FCX), (GE), (GS); Finerman owns (BAC); Finerman owns (IBM); Finerman owns (JCG); Finerman owns (JPM); Finerman’s Firm owns (POT) calls; Finerman’s firm owns (WMT); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Jon Najarian owns (CSCO) call spreads; Jon Najarian owns (MMR) calls; Jon Najarian owns (NKE) short calls; Jon Najarian owns (SLV) short calls; Jon Najarian owns (GLD) calls; Jon Najarian owns (CME); Jon Najarian owns (CBOE)
For Zach Karabell
River Twice Capital owns (CSCO)
River Twice Capital owns (GS)
River Twice Capital owns (IBM)
River Twice Capital owns (MSFT)
River Twice Capital owns (NKE)
River Twice Capital owns (POT)
For Patty Edwards
Edwards own (AAPL) for clients
Edwards own (BAC) for clients
Edwards own (C) for clients
Edwards own (CSCO) for clients
Edwards own (FCX) for clients
Edwards own (GE) for clients
Edwards own (GLD) for clients
Edwards own (IBM) for clients
Edwards own (JCG) for clients
Edwards own (JNK) for clients
Edwards own (MSFT) for clients
Edwards own (NKE) for clients
Edwards own (TIF) for clients
For Dennis Gartman:
Funds managed by Gartman own Gold
Funds managed by Gartman own (ANDE)
Funds managed by Gartman own corn
Funds managed by Gartman own (RJA)
Funds managed by Gartman own (POT)
Funds managed by Gartman own (MOS)
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Oppenheimer & Co. Inc. makes a market in the securities of PETM, SPLS, BBBY, ORLY, and TSCO.
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Funds managed by Biderman own (AAPL)
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